On August 6th the U.S. Postal Service released its financial report for the third quarter of the fiscal year, which was highlighted by a loss of $3.0 billion (comparing the latest three months in 2021 to the same period in 2020). The Postal Service now appears all but certain to be on the path toward its 15th consecutive year of suffering a year-end loss of a billion dollars or more.
Diving into the specifics of the results, it is apparent that the most significant Achilles heel for the USPS’s fiscal sustainability remains the agency’s unencumbered cost growth. In fact, total operating expenses increased by $3.0 billion (an increase of 8.3%), again compared to the same period last year.
This cost growth conundrum is certainly not lost on the radar of issues for the USPS leadership, which has been seeking to advance its 10 year business plan that is intended to achieve “financial stability and service excellence.” The plan assumes a combination of legislative actions and additional directives that the Postal Service can apply on its own.
For implementation, the Postal Service has made clear to prioritize some of the bolder reforms first, which entails across the board mail slowdowns, causing significant delays in end-to-end delivery times for countless businesses and communities nationwide. Consumers have grasped full well the seriousness of the Postal Service universal obligation to efficiently deliver mail and are rightfully skeptical about targeting this Post activity directly for cost-cutting.
Consumer anxiety aside, the Postal Regulatory Commission has further condemned in strong terms the logic upon which the Postal Service is basing its slow-down plan. In its recent detailed opinion, the PRC found several key flaws in statistical assumptions and the USPS’s insufficient trial process to assess the mechanics service degradation.
The Commissioners ultimately appear to surmise that USPS’ savings plan simply will not work. Their opinion states: “the Postal Service’s estimated annual cost savings for the proposed service standard changes do not indicate much improvement, if any, to the Postal Service’s current financial condition. Rather, the estimated cost savings from extending the service standard would be eliminated by additional costs associated with the growth in packages.”
The realities of these Postal finances are further supplanted by the quarterly data on the ongoing shifts towards competitive market services. Various labor-related expenses increased 10.0% and transportation costs increased by 8.3%, reflecting just how difficult it is to adapt to organization’s competitive acceleration. Shipping and packages now account for 61 percent of USPS total delivery weight – up from 49 percent just two years ago.
As the American Consumer Institute has discussed in-depth, it is essential for USPS to grasp the individual impacts of its products. While measures to create “integrated postal networks,” like Section 202 of the latest Postal Reform proposal, may sound innocuous on the surface, they actually represent a poison pill for USPS’ long-term sustainability. Given the skyrocketing expenses for personnel, transportation, and much more, it is most appropriate for USPS to present granular information about the true origins of such outlays. Given the Regulatory Commission’s vast distrust with USPS’ latest plan, perhaps they will agree that these concepts can deliver actual benefits.
Published in the Economic Standard.